2020 (2) TMI 1142 - AT - Income Tax

Reopening of assessment u/s 147 - validity of reasons to belief - applicability of mind before according sanction - assessment u/s 153C - HELD THAT - AO has referred to the issues which were considered in the assessment order dated 23.12.2011 framed u/s 143(3) r.w.s. 153C of the Act. As mentioned elsewhere, the said assessment order was declared null and void and thus became non-est. This means that everything has gone back to the stage of the return of income and, therefore, the AO should have proceeded from the stage of the return of income. A careful reading of the aforesaid notice and the reasons for the belief that the income has escaped assessment clearly show that the AO wanted to proceed in the light of the provisions of section 151(1) The reasons for belief if read with the provision of section 151(1) of the Act clearly show that there is no application of mind by the AO nor there is any application of mind by the sanctioning authority. Neither the Addl. Commissioner nor the Commissioner applied his mind before according sanction. None of the authorities realized that there is no assessment framed u/s 143(3) of the Act on the date of the assumption of jurisdiction. The erstwhile assessment has been declared as null and void as mentioned as well. In our considered opinion assumption of jurisdiction without any application of mind is bad in law. Same reasons have been given for reopening the assessment which were used for framing the assessment u/s 143(3) r.w.s 153C of the Act. The Hon ble High Court of Punjab and Haryana in the case of Smt. Anchi Devi 2008 (3) TMI 39 - HIGH COURT PUNJAB AND HARYANA has held that AO cannot be allowed to initiate fresh reassessment proceedings on identical facts where the first reassessment proceedings were quashed being barred by limitation. We are of the considered view that the AO has wrongly assumed jurisdiction in framing the assessment order dated 02.03.2015 u/s 143(3) r.w.s 147 of the Act and such order deserves to be set aside. - Decided in favour of assessee.

Issues Involved:
1. Assumption of jurisdiction under Section 147 of the Income Tax Act.
2. Validity of the reassessment order under Section 143(3) read with Section 147.
3. Application of mind by the Assessing Officer (AO) and sanctioning authority.
4. Use of identical reasons for reopening assessment as in the annulled assessment.

Detailed Analysis:

1. Assumption of Jurisdiction under Section 147:
The primary issue raised by the assessee in the cross objection was the assumption of jurisdiction under Section 147 of the Income Tax Act. The assessee argued that the jurisdiction was assumed without complying with the mandatory conditions of Sections 147 to 151. The Tribunal noted that the original assessment order dated 23.12.2011, framed under Section 143(3) read with Section 153C, was declared null and void by the Commissioner of Income Tax (CIT) under Section 264. Consequently, the AO should have proceeded from the stage of the return of income, as the previous assessment had become non-est.

2. Validity of the Reassessment Order:
The reassessment order was challenged on the grounds that it was based on the same reasons used in the annulled assessment order. The Tribunal observed that the AO had not applied his mind, nor had the sanctioning authorities (Additional Commissioner and Commissioner) before according sanction. The Tribunal cited the case of Smt. Anchi Devi, where it was held that the AO cannot initiate fresh reassessment proceedings on identical facts where the first reassessment proceedings were quashed.

3. Application of Mind by AO and Sanctioning Authority:
The Tribunal scrutinized the reasons recorded by the AO for the belief that income had escaped assessment and found that there was no application of mind by the AO or the sanctioning authorities. The Tribunal emphasized that the approval for initiating proceedings was given without realizing that there was no assessment framed under Section 143(3) on the date of assumption of jurisdiction, as the erstwhile assessment had been declared null and void.

4. Use of Identical Reasons for Reopening Assessment:
The Tribunal noted that the reasons for reopening the assessment were identical to those used in the annulled assessment order. The Tribunal referenced the High Court of Punjab and Haryana's ruling in the case of Smt. Anchi Devi, which held that the AO cannot initiate fresh reassessment proceedings on identical facts if the first reassessment proceedings were quashed. The Tribunal also cited the High Court of Rajasthan's decision in the case of M/s. Rameshwar Prasad Sharma, which held that reassessment cannot be framed after issuing notice under Section 148 on the same issues that were the subject matter of an annulled assessment.

Conclusion:
The Tribunal concluded that the AO had wrongly assumed jurisdiction in framing the reassessment order dated 02.03.2015 under Section 143(3) read with Section 147. The reassessment order was set aside, and the cross objection of the assessee was allowed. Consequently, the appeal of the revenue was dismissed.

Order Pronounced:
The order was pronounced in the Open Court on 20th February 2020, dismissing the revenue's appeal and allowing the assessee's cross objection.

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